Suppose the risk-free return is 3.5% and the market portfolio has an expected return of 11.2% and

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Suppose the risk-free return is 3.5% and the market portfolio has an expected return of 11.2% and a volatility of 17.9%. Merck & Co. (Ticker: MRK) stock has a 21.5% volatility and a correlation with the market of 0.045.

a. What is Merck’s beta with respect to the market?

b. Under the CAPM assumptions, what is its expected return?

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Corporate Finance The Core

ISBN: 9781292158334

4th Global Edition

Authors: Jonathan Berk, Peter DeMarzo

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Question Posted: Feb 29, 2024 04:01 AM

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Suppose the risk-free return is 3.5% and the market portfolio has an expected return of 11.2% and

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Corporate Finance The Core

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